Mistri Brothers Compound vs NEW INDIA ASSURANCE CO. LTD.

THIS is an appeal filed by M/S Shah Agency, who were the complainant before the Gujarat State Consumer Disputes Redressal Commission. The case of the complainant, the present appellant before the State Commission, was that it had taken two insurance policies from the respondent/OP for coverage of the goods, machinery and other equipments. Policy number 1121020011878 was for coverage of machinery up to Rs.9 Lacs and the second policy, number 1121020011881 was for coverage of stocks upto Rs.20 lakhs. According to the applicant/complainant, on 01.02.1999 there was a fire in the factory due to electrical short-circuit which caused heavy damage.

ON a claim by the complainant, the respondent/OP appointed a surveyor who gave his assessment of loss. During the course of the investigation by the surveyor it was revealed that for a single machine bought before the incident of fire, the complainant had two separate cost invoices. The insurance company sought clarification from the complainant and was not satisfied with reply. The respondent/insurance company therefore, rejected the claim as a fraudulent one and repudiated it for violation of condition number 8 of the policy. This condition reads "if the claim being in any respect fraudulent or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the insured or anyone acting on its behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the wilful action with the connivance of the insured, all benefits under this policy shall be forfeited." The state commission held that the decision of the insurance company to reject the claim could not be considered unreasonable or illegal. Therefore, the complaint was dismissed, by the State Commission.

In the appeal before us the appellant/complainant, has stated that the insurance company is legally liable to settle the claim for Rs. 679881, claimed by him. However, the complainant is willing to accept Rs. 360,600/-, as recommended by the surveyor, appointed by the insurance company. The order the State Commission has been assailed primarily on the following grounds " a. The insurance company did not conduct any investigation or arrive at any finding of the alleged fraud by the appellant. The report of the surveyor too did not reach any conclusion of commission of fraud by the appellant. Therefore, repudiation on the ground of fraud is not sustainable. b. The matter of two bills from M/S Ajanta Textiles, having the same date and same invoice number, had been explained to the insurance company in an affidavit of 22.7.1999. Therefore, the complainant/appellant has not committed any fraud as alleged, to benefit at the expense of the insurance company. c. The order of the State Commission does not give any finding on the allegation of fraud. It has only accepted the conclusion of the respondent/OP. Therefore the impugned order is legally unsustainable.

LEARNED counsel for the appellant, Mr. Vinod Kumar argued before us at length on the allegation of fraud. He argued that the machinery in question, supplied by M/S Ajanta Textiles, required certain changes, which were carried out and fresh bills were raised. According to him, this explains why two different bills of the same invoice number and date were issued. LEARNED counsel brought to our attention the affidavit of Mr. Prakash B. Shah, the sole proprietor of the complainant firm Shah Agency dated 22.7.1999. The relevant part in this affidavit reads as follows- "That some of the above items were not functioning as per my requirements. On approaching M/s Ajanta Textiles, I was told to make certain changes in the machineries. Hence in some cases, there are two different bills of the same number, date and item. Earlier bills were not entered in our books of accounts." From the above averment in the affidavit of Mr. Prakash B. Shah and the argument of the learned counsel it is clear that there would have been some time gap between the date of purchase of the machine in question and the date when it was received back after requisite repairs. The time gap logically needs to be long enough for the performance deficits of the machine to be identified by the purchaser, to be discussed with the supplier of the machinery, for the latter to effect necessary modifications/repairs and for the machinery to be returned to the purchaser with bills indicating the cost of such modifications/repairs. It is not the case of the appellant/complainant that everything had happened on the same day. More importantly, there are six bills on record, all in sets of two. In all, there are 3 in voices of three different dates. In all three case, there is a second invoice (of same number and date) with a quantum jump in rate for exactly the same item. There is nothing in these bills to show what repairs were carried out. None of them can therefore, pass for invoices for modification/repair of machinery already supplied. The surveyor has mentioned them with reference to his discussion with one Mr. Gandhi of Ajanta Textiles who reportedly informed him that "they were not the manufacturers of the machineries but procured the machinery from some other suppliers."

THIS being the admitted position of Ajanta Textiles, they could have been in no position to play the role of a manufacturer i.e. modify/repair the machinery already supplied. Counsel for the appellant/complainant had no explanation for this. Therefore, the claim that second billing on the same day, with same invoice number and higher amount, is due to the fact of repair/modification, must be rejected as unsustainable. In the above background, the respondent/New India Assurance Co. was justified in treating the matter as violation of the policy condition and repudiating the claim, in so far as it related to the machinery and equipment damaged in the fire. This was concerning the claim of Rs.153840/- from the insurance, as seen from the report of the Surveyor. However, in the same fire, stocks in process have also been damaged. These stocks were covered under a different policy, as already observed. The report of the Surveyor shows that "The stocks at different stages of production were badly burnt." His report gives a detailed assessment of this damage and recommends a settlement of Rs.3,45,288.60. We do not find any thing in the report of the Surveyor which could suggest false billing or any other attempt to raise an objectionable claim, in so far as the stocks in process are concerned.

THE letter of 4.10.1999 from the respondent/insurance co. to the appellant/complainant, refers to the matter arising from double invoicing for the machinery as the reason for repudiation of the claim. But, in a clear attempt to obfuscate the matter, does not limit the repudiation to the claim under the policy No. 1121020011878, dealing with the machinery. It mentions both policies, for which there is no explanation forthcoming from the record. Even in the affidavit of Mr. Anil Gupta, Deputy Manager, New India Assurance Co, the entire justification for repudiation revolves around the invoices for the machinery. We have already observed that this ground is applicable to only one policy and cannot cover both. THE issue of machinery invoices has nothing to do with the other policy covering risk to the stocks. Learned counsel for the respondent was specifically asked how the same ground could be used for repudiating claims arising under two separate policies. He had no answer except that both claims arose from the same incident of fire. This is not an acceptable explanation. Two different policies, covering two different risks, constitute two different contracts. Violation of a condition under one contract does not extend to the other contract. Hence, in our opinion, the insurance company did not have any justification to repudiate the claim under policy No. 1121020011881 which covered the stocks and stocks in process.

FOR the reasons detailed above, we uphold the impugned order of the State Commission, to the extent of rejection of the consumer complaint under policy No.1121020011878, which covered the risk to the machinery and accessories. The appeal is allowed to the extent of the claim under the policy No. 1121020011881. The respondent/OP shall settle the claim under this policy for the amount recommended by the Surveyor i.e. Rs.3,45,288.60. This amount shall also carry interest at the rate of 6% from the date of the consumer complaint.